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Public Sector Strike Heralds the Return of the Nasty Party

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David Cameron's dismissal of the huge and unprecedented national public sector strike on 30 November with his statement that it proved "a damp squib" may well come back to haunt him before the next election. It reflects a massive chasm of understanding within the coalition when it comes to the breadth and depth of anger that exists in the country over the brutal injustice that they are intent on inflicting on the vast majority in response to the greed and venality of a small minority.

Combined with the chancellor George Osborne's Autumn Statement, Cameron's flippant disregard for the quality of life of millions of people has ripped the mask off to reveal the nasty party in its full glory. In other words, this week has seen the Tory-led coalition unleash a full blown class war as it moves to protect the interests, privileges and wealth of their friends and backers in the boardrooms of the City as the economic crisis deepens across the eurozone and beyond.

According to the Institute of Fiscal Studies, the effect of the chancellor's latest spending proposals will be the further penalisation of the poor and more help for the better-off.

The decision not to increase tax credits will hurt the poorest in society, with the IFS predicting that the overall effect of the chancellor's new proposals will be a reduction in the incomes of the bottom 30 percent income bracket and more children pushed into poverty.

This continues a pattern of punishing the poor for an economic crisis not of their making, especially in light of last year's spending review when a cap on housing benefit and swingeing cuts in disability allowances were introduced

The IFS predicts that those on an annual salary of £15,600 will lose an average of £44.75 in 2010-13 as a result of the chancellor's tax reforms, while those on £18,200 will be worse off by around £36. Meanwhile, at the other end of the income scale, those on £76,100 will be better by around £105 in 2012-13, with those on £45,300 benefitting to the tune of around £98.

Overall, average incomes in the UK according to the IFS are set to drop by 7.4% by 2013, and will be no higher in 2015-16 than they were in 2002-03.

When it comes to the government's much touted bank levy, designed to appease society's justifiable indignation over the way the banks are being let off the hook, it is nothing more than a smokescreen. As Lydia Prieg, Finance and Business Researcher at the New Economics Foundation think tank, points out:

The funds raised from British banks via the bank levy are likely to be entirely cancelled out by the government's corporation tax cuts. It is also worth remembering that the financial services industry is exempt from VAT, which has introduced significant distortions into the UK economy, and has very likely inflated banks' profits.

The taxpayer is nowhere near recouping the cost of the extraordinary support extended to the banking industry throughout the crisis (for example, the billions forfeited to recapitalise Lloyds and RBS), and this ignores the substantial on-going cost of financing these initiatives (which the NAO estimate to be approximately £5bn per year). The revenue raised from the bank levy (£2.5bn) will be a drop in the ocean compared to these costs, particularly given the cuts in corporation tax"

Furthermore, despite the output that the UK lost as a result of the banking crisis, the financial services industry will still be able to offset losses incurred during the crisis against their future tax liabilities, and so reduce their future tax bills!

The financial services industry remains undertaxed in comparison to other sectors of the economy.

The key lesson learned from the banking crisis, however, isn't that the financial services industry need to be made to pay its fair share in tax, and isn't even that bankers' pay and bonuses should be capped. It is that the banks need to be taken into public ownership and run to meet the needs of the real economy for investment and planning, rather than left to operate as casinos for the benefit of speculators.

Let's be clear, there is an alternative to this gloomy outlook for millions of working people and their families who are already finding it hard to make ends meet. That alternative is to tax the rich in a manner befitting a civilised society and thereby embrace a just response to a deepening recession caused by the greed of those at the very apex of the income bracket. It also includes re-introducing demand into the economy via a cut in VAT, an increase in tax credits, increase in benefits, and the protection and preservation of the public sector.

Perhaps the most despicable act of the Tory-led government since coming to power has been its relentless assault on the public sector, which over the past year in particular has been traduced as lazy, inert, tired and stagnant, wherein its workers are overpaid, over protected and over valued in comparison to their counterparts in the private sector. Rather than allow themselves to be placed in a race to the bottom with private sector workers when it comes to pensions and terms and conditions, public sector workers should feel proud that as a result of being unionised they have managed to assert their right to dignity at work. Indeed, if ever a case needed to be made for the concept of trade unions, here it is.

The question after 30 November is what next?

The hope of the union leadership is that the government will have been brought to its senses as a result of the strike action and will now return to the negotiating table prepared to engage in serious talks and offer concessions. Given the ideological zeal that lies behind the Treasury's measures to deal with the recession, there seems little guarantee that this will be the outcome. On the contrary, it is far more likely that more action will need to be taken over the coming months if the government is to be defeated.

Going forward, the success of 30 November cannot and must not be measured in its impact on the likes of David Cameron and George Osborne at this stage. Far more important in the short term is its impact on the millions who came out in unprecedented numbers.

Now they know that in unity there is strength. Now they know they can win.